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Persistent Trend As Stocks Become Stretched

Jason Goepfert

The persistence of the S&P’s uptrend over the past year is among the highest in its history. Same goes for the past 3, 5, and 10 years.

When we look at the 5 comparable trends, using the 200-day average as a guide was helpful.

Rubber band

The S&P is more than above its 200-day average for the first time in years. That’s not unusual following a bear market, but it is when trading at a multi-year high.

The others led to either persistent weakness, or not at all, with no real in-between markets.

Where’s the money?

Investors pulled more than $22 billion from equity mutual funds and ETFs in early January. That’s a new record outflow going back more than a decade. It doesn’t fit with virtually every other indicator we follow.

Record level of extremes

More than 52% of our indicators are now at an optimistic extreme. None of them are at a pessimistic extreme.

Good sign for natty

In the December 28 report, we looked at big rallies in natural gas from a multi-month low.

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Sundial Capital Research is an independent investment research firm dedicated to the application of mass psychology to the financial markets. Sundial publishes the SentimenTrader.com website.

Our focus is not market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence.